Monday, September 14, 2015


As your kids go off to college it is important to note what information and documentation to save for tax time.

In all cases your tax professional will need to know the total amount of tuition and fees paid during calendar year 2015.  You will receive a Form 1098-T from the school next January, which you should give to your tax preparer, but in most cases the information reported on these forms are as useful as tits on a bull.  Your tax pro cannot rely on this statement only to properly calculate any education tax benefit to which you are entitled.  So you should keep copies of all billings from the college and record the amounts and dates of all payments made. 

FYI - beginning with tax year 2016 (for returns to be prepared in 2017) you must have a Form 1098-T in order to claim an education credit or deduction on your Form 1040 (or 1040A).  Let us hope the IRS requires schools to properly and completely fill out the Form 1098-T for 2016 and forward.

The college may bill you for the first semester of 2016 at the end of 2015.  If you make a payment for 2016 tuition in 2015 this amount can be included in the amounts used to determine your 2015 tax benefits.  But if the payment is made in 2016 it will apply to tax year 2016. 

You should save, and give to your tax pro, all “Burser’s Statements” or other financial statements you receive from the school.  You, or your student dependent, may be able to access and print-out 2015 financial transaction information online.

The American Opportunity Credit allows you to include the cost of books, supplies, and equipment that are “required for enrollment or attendance” at the school in the calculation of the credit.  So save and give your tax pro all receipts for required books, supplies, and equipment.  These items are also considered in the determination of tax-free distributions from IRAs, qualified tuition programs (like Section 529 plans), and Education Savings Accounts.

Payments for room and board are not included in either of the education tax credits or the above-the-line tuition and fees deduction (one of the currently expired “tax extenders”), but they are included in the determination of tax-free distributions from IRAs, qualified tuition programs, and Education Savings Accounts.  So if you received a distribution from any of these sources in 2015 (if you did you should receive a Form 1099 in January) tell your tax pro about payments for room and board.

Qualifying payments must be reduced by any scholarships or grants received or applied during the year (they will be reported on Form 1098-T) and any tax-exempt employer-paid assistance.  Scholarships, grants, and other assistance are first applied toward qualified tuition and fees, even if part or all of the scholarships or grants are for non-qualified expenses like room and board.  So if qualifying tuition and fee costs eligible for a credit or deduction total $10,000, and scholarships and grants total $8,000, only $2,000 of tuition and fees are available for a credit or deduction.

It is better to acquire and put aside all the documentation discussed above now, so that is ready to give your tax pro, then to have to rush around and look for it during tax time.


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